5 Hidden Costs for New Buyers
March 10, 2016
Buying a home for the first time can be an overwhelming experience, which is why it's important that your first-time buyer clients have all of their finances in order and know all of the expected expenses ahead of time.
Read more: Dos and Don'ts for a First-Time Home Buyer
"It's definitely a challenge," said Eric Roberge, a certified financial planner in Boston and founder of Beyond Your Hammock in a recent interview with CBS MoneyWatch. "That first-time home buying, it's really an emotional experience -- you're coming into your own, you kind of feel successful ... you tend to just overlook certain things or say, 'I'm just going to get into the home and figure it out.'"
These are a few types of expenses that new owners should not overlook when buying a home for the first time.
Fees/Expenses: Make sure to allocate funds to pay attorney fees, appraisal fees, application fees, recording fees, and the costs involved in getting a mortgage. Buyers also need to budget for prepaid expenses including homeowner's insurance and property taxes for the next quarter.
Title insurance: The average cost of title insurance is 0.5 percent of the home's purchase price, though it does vary by state. Title insurance is important to have because it protects the buyer from the chance that the previous seller didn't own the property in the first place.
Home Warranty: This protects buyers from expensive replacements or repairs when buying a home that isn't brand new. According to CBS MoneyWatch, the cost of basic warranty ranges from $350-500. Warranty with extra protection will run around $100-300 more.
Moving costs: When buying a new place, moving expenses are of course, inevitable, so make sure your clients make room in their budget to accommodate them. The typical in-state move costs around $1,170, according to the American Moving and Storage Association, while an out-of-state move can run around $5,630.
Furniture/Decor: It seems like an obvious expense, but many new buyers forget that moving on up from their previous one-bedroom or studio apartment to a single-family home means there are many more rooms that need to be furnished and decorated.
Source: "Costs that can blindside new homeowners," CBS MoneyWatch (March 9, 2016)
Updated: June 05, 2020